Question

In: Accounting

Please explain how to do the below problems answers are given at the end. The Larkspur...

Please explain how to do the below problems answers are given at the end.

The Larkspur Furniture Company's chair manufacturing requires multiple shades of wood stain. The most popular stain color is "Warm Oak”. The company's production operation uses 560 cases per year of this stain. The ordering cost is $43 per order. The company estimates the holding costs at $8 per case per year. The lead time to receive a shipment from the supplier is 5 days. The company operates 250 days per year.  

What is the total annual cost of ordering and holding the product? This calculation should be in dollars, so your answer should have two (2) decimal places.

This problem does not require you to enter the units of measure for your answers. Don't type anything in the response box below except the final calculation result.  

Answer:

The correct answer is: 620.72

Question text

The Larkspur Furniture Company's chair manufacturing requires multiple shades of wood stain. The most popular stain color is "Warm Oak”. The company's production operation uses 560 cases per year of this stain. The ordering cost is $43 per order. The company estimates the holding costs at $8 per case per year. The lead time to receive a shipment from the supplier is 5 days. The company operates 250 days per year.  

What is the length of time in days between orders of this item?

This problem does not require you to enter the units of measure for your answers. Don't type anything in the response box below except the final calculation result.  

Answer:

Example 4. Time = (working days per year)/(# of orders per year)

The correct answer is: 34.82

Question text

The Larkspur Furniture Company's chair manufacturing requires multiple shades of wood stain. The most popular stain color is "Warm Oak”. The company's production operation uses 560 cases per year of this stain. The ordering cost is $43 per order. The company estimates the holding costs at $8 per case per year. The lead time to receive a shipment from the supplier is 5 days. The company operates 250 days per year.  

What is the reorder point? Assume there is no safety stock.   

This problem does not require you to enter the units of measure for your answers. Don't type anything in the response box below except the final calculation result.  

Answer:

The correct answer is: 12

Solutions

Expert Solution

What is the total annual cost of ordering and holding the product?
Calculate EOQ ?
Production 560 Cases per year
Ordering cost $43 Per order
Holding cost $8 Per order
Company operates 250 days in a Year
Lead time for Shipment 5 days
EOQ 2* Demand * Ordering Cost/ Holding Cost
6020
Economic Order Quantity                              77.6
Total Cost = Annual Holding Cost + Annual ordering Cost
Annual Holding Cost = EOQ/2 * Holding Cost per Case
$                     310.35 (a)
Annual ordering Cost = Total Production/ EOQ * Ordering Cost per Case
$                     310.35 (b)
Total Cost = $                     620.71 (a) + (b)
What is the length of time in days between orders of this item?
Length of time = EOQ /Total Production* Number of days of operation
EOQ                                                                                    77.6 As calculated above
Total production 560 cases per year
Number of days company operates 250 days
Length of time                                                                                  34.64
What is the reorder point?
Reorder point =Average unit daily production/ Lead time
Total production 560 cases per year
Number of days company operates 250 days
Average Unit daily production 2.24
Lead time 5 days
Reorder point 11.25

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